2. Double-declining-balance. Double-Declining-Balance Method x Choose Denominator: x Fraction of Year = Depreciation Expense = Depreciation Expense Choose Numerator: Formula Fraction of Year Amount for 2021 % x Amount for 2022
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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On October 1, 2021, the Allegheny Corporation purchased equipment for $181,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 400,000 units during its life.
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